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Thursday, August 06, 2009 - 08.15 GMT |
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Post war flurry
of new investment interests in Sri
Lanka-Barron’s online |
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War’s
end has
prompted
a flurry
of new
share
issues
and Sri
Lanka
based
investment,
states
Barron’s
America’s
premier
financial
magazine
in its
latest
issue.
One of
the
first
issues
to
emerge
is the
US
Dollar
75
million
fund of
the
Singapore
based
Calamander
Capital.
Anglo-Sri
Lankan
fund
managers
Guardian
Management
have
re-launched
their
moribund
Sri
Lanka
fund
with a
planned
London
listing
and $25
million
of new
money
directed
at the
Sri
Lanka
tourist
industry.
The
article
in
Barron
by Eric
Ellis
states
that
speculated
expects
a huge
postwar
surge of
tourists
to the
island’s
ravishing
beaches.
He adds
that
Colombo
brokers
talk
about a
“peace
portfolio”
and
local
powerhouse
conglomerate
John
Keells
Holdings
(ticker:
JKH. Sri
Lanka)
is at
its
heart.
Barron’s
provides
in depth
analysis
and
commentary
on the
markets,
updated
every
business
day
online.
Here
is the
text of
its
recent
report
on Sri
Lanka.
In Sri
Lanka,
the
investment
axiom
that the
best
time to
plunge
into the
market
is when
there is
“blood
on the
streets”
is
tragically
literal.
More
than
80,000
citizens
of the
tiny
Indian
Ocean
Island
were
killed
in a
25-year
civil
war
between
the
government
and
separatist
Tamil
Tiger
rebels.
Hostilities
ended in
May
after
government
forces
killed
off the
rebels
in a
bloody
last
stand.
It was
brutal,
it was
ugly,
but it
succeeded
in
uniting
21
million
people,
many of
whom
have
never
known a
homeland
that
wasn’t
at war.
Plagued
by
suicide
bombings
and
Tiger
air
raids,
Colombo’s
war-torn
stock
market
fell by
40% in
2008.
But on
May 18,
the day
the
triumphant
Sri
Lankan
military
paraded
the
bodies
of the
slain
Tiger
leaders
on state
television,
the Sri
Lankan
All-Share
index
jumped
6%. It’s
up 25%
since
May, and
60% this
year.
Asia
enthusiast
Jim
Rogers,
George
Soros’
one-time
partner
at the
Quantum
Fund,
recently
wrote in
his blog
that
“Sri
Lankan
stocks
are the
only
equities
I would
consider
buying
at the
moment.”
Dhammika
Perera,
a local
banking
mogul
who’s
also the
head of
the
government’s
foreign-investment
board,
says $4
billion
to $5
billion
will be
spent
rebuilding
the
shattered
economy.
The
International
Monetary
Fund
just
approved
a $2.6
billion
loan to
the
island
nation.
The rest
will
have to
come
from
private
sources.
There’s
a lot to
rebuild.
As Asian
metropolises
go,
Colombo
is more
Kabul
than
Kuala
Lumpur.
War
robbed
Sri
Lanka of
the
prosperity
its
Asian
neighbors
have
enjoyed
since
the
1980s.
Sri
Lanka is
one of
the
world’s
poorest
countries,
burdened
by an
infrastructure
that
hasn’t
much
changed
since
the
1940s,
when it
British
Ceylon.
Infrastructure
aside,
Sri
Lanka
bears
some
resemblance
to
Malaysia.
There
are some
27
million
Malaysians,
versus
21
million
Sri
Lankans.
And they
have a
broadly
equal
cultural
mix:
Malaysia
has a
majority
Malay
Muslim
community,
and
significant
Chinese
and
Hindu
Tamil
minorities;
Sri
Lanka
has a
mainly
Buddhist
Sinhalese
majority,
and
prominent
Tamil
and
Muslim
communities.
But
that’s
about
where
the
happy
comparisons
end, and
where
there
seems so
much
upside
for Sri
Lanka.
Malaysia’s
$230
billion
economy
is today
almost
eight
times
larger
than Sri
Lanka’s.
Where
educated
Malaysians
export
cutting-edge
gadgets
for the
world’s
tech
titans,
and need
millions
of
migrant
workers
to help,
Sri
Lankans
export
tea and
underwear
and its
people,
often to
work in
households
and at
building
sites in
the
Middle
East.
Where
Malaysians
rush
their
goods
around
on a
national
network
of
modern
freeways
and
ports,
Sri
Lanka
has just
eight
miles of
road one
could
charitably
describe
as a
freeway.
Strategically
sited
Sri
Lanka
China is
rebuilding
its
southern
port for
oil
storage
has
missed
myriad
opportunities
to
become
the
Singapore
of the
region.
So how
to play
this
catch-up
country?
Colombo
brokers
talk
about a
“peace
portfolio”—and
local-powerhouse
conglomerate
John
Keells
Holdings
(ticker:
JKH. Sri
Lanka)
is at
its
heart.
The
entire
Colombo
market
is worth
about $7
billion,
and
Keells
is
around
10% of
it, a
genuine
proxy
for the
economy.
From
information
technology
to
supermarkets,
banks,
tea and
shipping,
it’s
near-impossible
to spend
money in
Colombo
and not
add to
Keells’
profits.
Investors
in Sri
Lanka
will
want to
see a
genuine
reconciliation
between
the
Sinhalese
and
Tamils.
As of
July,
some
200,000
Tamils
were
still
held in
refugee
camps.
Yet
speculators
expect a
huge
postwar
surge of
tourists
to the
island’s
ravishing
beaches.
And
Keells
will
benefit;
it owns
about
half >
of Sri
Lanka’s
hotel
rooms.
Keells
last
year
earned
about
$41
million
on sales
of $356
million.
Its
shares
have
roughly
doubled
since
May.
Local
brokers
such as
NDB
(part of
National
Development
Bank)
generally
rate the
stock a
Strong
Buy.
The
island
also is
famous
for its
tea, and
among
the
best-managed
of the
big
plantation
houses
is
Ceylon
Tea
Services
(CTEA.
Sri
Lanka).
CTS last
year
grew 31%
to
$37.86
million,
while
profits
gained
8% to
$9.8
million.
Its
shares
have
gained
about
20% in
the last
year.
Anglo-Sri
Lankan
fund
managers
Guardian
Management
have
re-launched
their
moribund
Sri
Lanka
fund
with a
planned
London
listing
and $25
million
of new
money
directed
at the
tourist
industry.
The
war’s
end has
also
prompted
a flurry
of new
issues.
One of
the
first to
emerge
is the
$75
million
fund of
Singapore-based
Calamander
Capital.
Chief
Executive
Officer
Roman
Scott
says his
is the
first
private-equity
fund
focused
solely
on Sri
Lanka,
and is
taking
stakes
in tea,
timber,
rubber,
property
and
banking.
Scott
confidently
expects
annual
returns
of 30%
to 35%.
“The
difference
now,” he
says, is
“the
risk has
finally
been
removed,
and we
are
investing
onto a
blank
canvas.
There is
only one
way for
us to
goand
that’s
up.”
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